Barak ready to scrap Phalcon

TEL AVIV -- Israel appears ready to cancel the sale of the Phalcon airborne early-warning system to China.

The Israeli Haaretz daily said on Sunday that Prime Minister Ehud Barak has been urged by his aides to cancel the deal this week before the Clinton administration is formally asked for a compensation package for a withdrawal from the West Bank and Gaza Strip.

The aides warn that Congress will not approve massive aid for a peace settlement without a resolution of the Phalcon deal.

Haaretz said Barak's advisers who want an end to the $250 million sale includes his chief of staff, Danny Yatom, his diplomatic adviser, Zvi Stauber, the National Security Council and air force.

Those who oppose the cancellation of the sale come from Israel Aircraft Industries Ltd, which signed the Phalcon contract. The contract includes an option for Beijing to buy at least three additional Phalcon systems.

Haaretz said Barak has not relayed any decision to the United States. This week, the House of Representatives is expected to debate the foreign aid bill on the floor. The debate is expected to include the Phalcon deal.